Microfinance shouldn't do the government's job

It is a requirement of civil society that government obviate the need for payday lenders, writes Carl Packman.

There has been a recent interest in microfinance as a means to draw vulnerable people away from the scourge of payday lending – an industry which saw its inevitable growth over the Christmas period, with the number of enquiries about it at the Citizens Advice Bureau doubling from last year. 

The Financial Times recently ran an article headlined Microfinancier gives payday lenders run for money. Reporter Sarah O'Conner discusses to what extent this type of financial product offers a fairer deal for borrowing money, with more manageable prices attached to loans: £162 on a 52-week loan of £600 compares well with the £25-30 per month you can expect to pay for a loan of £100 with the average high cost credit seller. 

Although relatively rare in the UK, the microfinance movement is over 40 years old. It all began in the early 1970s in Bangladesh and Latin America and since then has seen small but effective support around the world. 

I spoke to Saloman Raydan Rivas, a microfinance expert, about Professor Mohammed Yunnus, the don of the microfinance movement. Rivas told me Yunnus wanted to develop a banking model which did not take advantage of the poor, but he was unsure of how to tap into existing local lending mechanisms, such as self-financed communities, to bring about change on a wider scale. 

Today there are many people trying to realise his dream, and Fair Finance, the case studied in the Financial Times' article, is one. In fact Faisal Rahman, the company’s director, is strongly influenced by the microfinance movement, and hopes to bring it to market in the UK.

But there is something rather rocky about relying on private equity funding, as Fair Finance does (a fact not discussed in the Financial Times article) that makes me worry, both in practice and on first principles. 

Fair Finance was declined investment money by Barclays and the Royal Bank of Scotland when it first started out, and they even had problems with Santander, which would not put up investment alone. When I asked Rahman about it, he admitted it was a setback, and one could argue this is hardly a surprise. Rahman wants funding from investors to sell loans ethically to people, charging low interest, and risking low returns, all to realise a dream of creating a banking model that undercuts usurers and rip-off merchants. 

For all the good he wants, many investors clearly see the words “low return” and run a mile. In short, we cannot rely on the good nature of profit-making big banks to finance ethical, non-profit, lending schemes. But should we expect any private business to do this? Since it is in the interest of the public purse to keep individuals' personal debt profiles down, should ethical lending not be a standard expectation of the government? 

It is surely a requirement of a civil society that the government allocate enough money – for instance, through a credit union – to ensure consumers aren't left with going to payday lenders as their only option.

Having said that, I understand Rahman’s motives. Recently it was reported that a loans company who target personnel in the armed forces with high cost credit at 3,300 per cent interest was sold advertising space in Defence Focus, the magazine of the Ministry of Defence. Is this perhaps a sign of how relaxed public bodies have become about payday lending?

High cost loans for the armed forces has become a big issue. A representative of Waterhouse Baker, who offer financial advice to any serving member of the forces, told me that payday loans is often a short-lived solution, “as many default as the monthly expenditure is too high for the income gained”. 

Problems like these need solving fast, because the problem of high personal debt is one which affects the whole economy and the whole society. For me, the buck stops with the government.

Given the enormity of the problem of debt, government should be in charge of reversing it. So while the aims of Fair Finance and other similar organisations are positive, pricing out payday lenders should be chiefly the preserve, not of microfinance, but of the state as part of its commitment to maintaining a civil society.

Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

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The decline of the north's sporting powerhouse

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Now, things are different.

On a drive between Sheffield and Barnsley, I spotted a striking painting of the Kes poster. Billy Casper’s two-fingered salute covered the wall of a once-popular pub that is now boarded up.

It is almost 50 years since the late Barry Hines wrote A Kestrel for a Knave, the novel that inspired Ken Loach’s 1969 film, and it seems that the defiant, us-against-the-world, stick-it-to-the-man Yorkshireness he commemorated still resonates here. Almost two-thirds of the people of south Yorkshire voted to leave the EU, flicking two fingers up at what they saw as a London-based establishment, detached from life beyond the capital.

But whatever happened to Billy the unlikely lad, and the myriad other northern characters who were once the stars of stage and screen? Like the pitheads that dominated Casper’s tightly knit neighbourhood, they have disappeared from the landscape. The rot set in during the 1980s, when industries were destroyed and communities collapsed, a point eloquently made in Melvyn Bragg’s excellent radio series The Matter of the North.

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Yet today, we rarely get to hear the voices of Barnsley, Sheffield, Doncaster and Rotherham. And the Yorkshire sporting powerhouse is no more – at least, not as we once knew it.

This should be a matter of national concern. The White Rose county is, after all, the home of the world’s oldest registered football club – Sheffield FC, formed in 1857 – and the first English team to win three successive League titles, Huddersfield Town, in the mid-1920s. Hull City are now Yorkshire’s lone representative in the Premier League.

Howard Wilkinson, the manager of Leeds United when they were crowned champions in 1992, the season before the Premier League was founded, lamented the passing of a less money-obsessed era. “My dad worked at Orgreave,” he said, “the scene of Mrs Thatcher’s greatest hour, bless her. You paid for putting an axe through what is a very strong culture of community and joint responsibility.”

The best-known scene in Loach’s film shows a football match in which Mr Sugden, the PE teacher, played by Brian Glover, comically assumes the role of Bobby Charlton. It was played out on the muddy school fields of Barnsley’s run-down Athersley estate. On a visit to his alma mater a few years ago, David Bradley, who played the scrawny 15-year-old Billy, showed me the goalposts that he had swung from as a reluctant goalkeeper. “You can still see the dint in the crossbar,” he said. When I spoke to him recently, Bradley enthused about his lifelong support for Barnsley FC. “But I’ve not been to the ground over the last season and a half,” he said. “I can’t afford it.”

Bradley is not alone. Many long-standing fans have been priced out. Barnsley is only a Championship side, but for their home encounter with Newcastle last October, their fans had to pay £30 for a ticket.

The English game is rooted in the northern, working-class communities that have borne the brunt of austerity over the past six years. The top leagues – like the EU – are perceived to be out of touch and skewed in favour of the moneyed elites.

Bradley, an ardent Remainer, despaired after the Brexit vote. “They did not know what they were doing. But I can understand why. There’s still a lot of neglect, a lot of deprivation in parts of Barnsley. They feel left behind because they have been left behind.”

It is true that there has been a feel-good factor in Yorkshire following the Rio Olympics; if the county were a country, it would have finished 17th in the international medals table. Yet while millions have been invested in “podium-level athletes”, in the team games that are most relevant to the lives of most Yorkshire folk – football, cricket and rugby league – there is a clear division between sport’s elites and its grass roots. While lucrative TV deals have enriched ruling bodies and top clubs, there has been a large decrease in the number of adults playing any sport in the four years since London staged the Games.

According to figures from Sport England, there are now 67,000 fewer people in Yorkshire involved in sport than there were in 2012. In Doncaster, to take a typical post-industrial White Rose town, there has been a 13 per cent drop in participation – compared with a 0.4 per cent decline nationally.

Attendances at rugby league, the region’s “national sport”, are falling. But cricket, in theory, is thriving, with Yorkshire winning the County Championship in 2014 and 2015. Yet Joe Root, the batsman and poster boy for this renaissance, plays far more games for his country than for his county and was rested from Yorkshire’s 2016 title decider against Middlesex.

“Root’s almost not a Yorkshire player nowadays,” said Stuart Rayner, whose book The War of the White Roses chronicles the club’s fortunes between 1968 and 1986. As a fan back then, I frequently watched Geoffrey Boycott and other local stars at Headingley. My favourite was the England bowler Chris Old, a gritty, defiant, unsung anti-hero in the Billy Casper mould.

When Old made his debut, 13 of the 17-strong Yorkshire squad were registered as working-class professionals. Half a century later, three of the five Yorkshiremen selec­ted for the last Ashes series – Root, Jonny Bairstow and Gary Ballance – were privately educated. “The game of cricket now is played in public schools,” Old told me. “Top players are getting huge amounts of money, but the grass-roots game doesn’t seem to have benefited in any way.”

“In ten years’ time you won’t get a Joe Root,” Rayner said. “If you haven’t seen these top Yorkshire cricketers playing in your backyard and you haven’t got Sky, it will be difficult to get the whole cricket bug. So where is the next generation of Roots going to come from?” Or the next generation of Jessica Ennis-Hills? Three years ago, the Sheffield stadium where she trained and first discovered athletics was closed after cuts to local services.

This article first appeared in the 19 January 2017 issue of the New Statesman, The Trump era